Liability claims and the rise of insurance fraud

Insurance fraud is evolving and so is the way we detect and respond to it.

While insurance fraud has been traditionally associated with motor and property claims, we are observing a noticeable shift. Increasingly, fraudulent activity is emerging in liability and building/contract works claims, areas that were once considered relatively low-risk.

We're seeing more red flags than ever before and not just in the usual places.

Recently, I had the opportunity to lead a training session focused on emerging fraud patterns and investigative techniques. What stood out was the growing sophistication of fraudulent behaviour. It's no longer just about exaggerated damage or inflated costs. We're now encountering staged incidents, falsified documentation and even entire inventories fabricated to support claims.

A growing concern in the Australian market

The Insurance Council of Australia reported that in 2023, its members detected $560 million worth of opportunistic insurance fraud in motor and property claims alone. The true cost is expected to be close to $1 billion including undetected fraud, which is estimated to exceed $400 million annually. While these figures tend to focus primarily on motor and first-party property claims, the ripple effect is being felt across all lines, including liability.

Fraud in liability claims tends to be more subtle. It often begins with a late notification or vague documentation. But as we dig deeper, inconsistencies start to surface-quotes that don't match, exaggerated losses, contractors who deny involvement in subsequent repairs, or claimants who become evasive.

Trusting the adjuster's nose

As adjusters, we rely on a combination of technical expertise and intuition-what many of us refer to as the "adjuster's nose." This instinct, developed through years of experience, helps us identify when something doesn't quite add up.

Some of the common red flags we look for include:

• Delayed reporting of incidents
• Financial distress signals from claimants or liquidated parties
• Evasive or inconsistent responses during interviews
• Unverifiable invoices or contractor details

When suspicions arise, we initiate deeper investigations. These may involve forensic document analysis, online research, site visits and direct engagement with stakeholders. It's about building a complete picture, not just of the claim, but of the context, behaviour and motivations behind it.

Staying ahead of the curve

The Australian insurance industry is responding with increased investment in fraud detection tools, data analytics and collaboration across insurers. But the frontline defence remains with us-the adjusters who engage directly with claimants and Insureds and can spot the early signs of deception.

Training plays a vital role in sharpening our instincts, but it's the day-to-day experience, the conversations and the patterns we observe that truly guide our approach.

As fraud continues to evolve, so must our strategies. Thoughtful investigation, cross-sector collaboration and a commitment to integrity are essential to protecting both insurers and honest policyholders.